Ferment brews in Soviet Baltics. Unrest in the Baltics carries more of a wallop than strife in Armenia (P. 8). Baltic nationalists want to remake the Soviet system to gain more rights. As the activists gain, Moscow ponders.

As unrest continues to simmer in Armenia, a potentially more serious challenge to Soviet power is taking shape in the Baltic states of Lithuania, Estonia, and Latvia. Baltic activists, backed by rapidly growing mass movements, are preparing demands that would, if accepted, change the face of the Soviet system - transforming it from a tightly centralized state to a loose confederation of republics. The activists are intensifying coordination among themselves. In addition, they are extending their linkages to other republics along the Soviet Union's western periphery: Byelorussia, the Ukraine, and Moldavia.

The next milestone in the agitation will come in October. At the beginning of next month, the Estonian Popular Front, which since its foundation in April has developed into a serious political force in Estonia, holds its founding congress. The following week, the Latvian Popular Front does the same. And the Lithuanian Movement for Support of Perestroika (``restructuring'') - known in Russian and Lithuanian usually as ``the Movement'' - expects to hold its congress in the third week.

The Baltic activism underlines one of the contradictions of Mikhail Gorbachev's reform program: Perestroika means different things to different nationalities inside the Soviet Union.

For the Armenians, it means a chance to right what is perceived as a deep national injustice. For Russian radicals, it means the economic and political revival of the Soviet system. For activists in the Baltic states - which, until Soviet annexation in 1940, were independent - perestroika means a chance to loosen the ties that bind them to Moscow.

Soviet leaders - notably reform-minded men such as Politburo member Alexander Yakovlev - are trying to contain the Baltic groundswell. But for Moscow, nationalist activism threatens to turn into a dangerous diversion of energy and time from the urgent task of improving the average Soviet citizen's economic well-being.

The dizzying speed with which the Lithuanian Movement has developed has led to dramatic conclusions from activists, who speak of the ``reawakening'' of the Lithuanian people.

``The empire is crumbling,'' one movement supporter says.

``The only question is whether it goes with a bang or not,'' says another.

Such emotions show both the Movement's strengths and weaknesses.

The speed with which it has developed has caught the Communist Party leadership flat-footed. On the other hand, this same speed leaves open the danger of self-destruction.

Unlike Estonia, where Communist Party leaders have rallied behind the movement, the Lithuanian party leadership is scrambling to catch up with events. A few senior officials have signaled sympathy with Lithuania's Movement. Most have reacted with hostility.

The Movement has been in existence for just over three months. Its development graphically illustrates both the brush-fire momentum of feelings in the Baltic states and the way Baltic activists have begun to work together for change.

In late May, two activists from the Estonian Popular Front spoke to students and intellectuals at Vilnius's Institute of Economics. Their visit coincided with discontent over the way the local Communist Party machine was perceived as dominating the choice of delegates to the Soviet party conference due in late June.

On June 3rd, the Movement for Support of Perestroika was founded. On July 9, activists claim 100,000 people turned out for a meeting ostensibly called to welcome back delegates to the party conference. In mid-July, demonstrators started to brandish the formerly banned yellow-green-and-red tricolor - the flag of the independent Lithuanian state that existed from 1918-1940.

On Aug. 23, the official Soviet news agency Tass reported that 100,000 demonstrators assembled to mark the anniversary of the 1939 Molotov-Ribbentrop pact, which carved up the Baltic region into areas of Soviet and German influence. Movement activists claim the real turnout was twice that. In either case, given Lithuania's population - 3.64 million, about 80 percent being ethnic Lithuanians - the turnout was was impressive.

Last week the Movement distributed the first issue of its weekly paper. The publication's name translates as ``re-birth,'' and it has a print run of 30,000. And, says Arvydas Juozaitis, a 32-year-old philosopher and one of the movement's informal leaders, it is not subject to official censorship.

The Movement has developed a video archive of its meetings and demonstrations, as well as some of its encounters with the republic's official leadership. The tricolor can be seen everywhere on lapel pins and stickers. What the Movement wants

The Movement's demands run from ecology, notably its opposition to the Ignalina nuclear power plant, to culture and economics. Activists say, however, that these are all parts of one whole: sovereignty.

One of the clearest statements of the Movement's views on sovereignty was contained in an article by Arvydas Juozaitas, published by the Estonian journal Raduga in August.

Mr. Juozaitas borrowed the definition of sovereignty from a dictionary published in Moscow in 1979: ``The sum total of the rights of a nation [or] people to the freedom of choice of its social and political system, to territorial integrity and economic independence.''

He noted later that sovereignty was ``in reality embodied in the parliamentary-democratic'' form of government. And he commented pointedly that ``the Lithuanian state that existed between 1918-'40 left in our social instincts some of the skills of democratic life.''

The present Soviet concept of a union is a ``sham,'' Movement activists say, a relic of the Soviet Union's ``totalitarian'' past. Instead, they say, they want a real ``union of equals.'' They are willing to entrust defense and foreign affairs to a central government. Like the Estonians, however, they say that they want the right to extend their relations with international organizations, neighboring countries, and their compatriots overseas.

Movement leaders talk of achieving real sovereignty through a new Soviet constitution. One of the first steps toward this would be to take active part in next year's elections to the country's Supreme Soviet (parliament). Mr. Gorbachev last June proposed giving the Supreme Soviet real legislative powers, in contrast to its current role as rubber stamp. One organizer says the Movement will try to get as many as possible of its own candidates elected to the Supreme Soviet.

Another leader, Vytautas Landsbergis, feels the Movement will not be able to do more than ``influence'' the choice of deputies.

Most activists are hoping, however, that the political situation will eventually allow the development of a multiparty system. In this case, they say, the Movement will probably transform itself into one or more parties. The Soviet leadership has so far firmly ruled out any chance of an opposition party.

In the meantime, the Movement is strengthening contacts with activists in other parts of the country. Last weekend, just before a big demonstration at the Ignalina nuclear plant, activists from Moldavia, the Ukraine, Byelorussia, Moscow, and Latvia met. They agreed to work toward a joint ``ecological action'' along the Soviet Union's western border. Activists from around the country met in Moscow in mid-July, and in Leningrad in August. Another Estonian Popular Front organizer visited Lithuania in July.

Events in Lithuania have moved so fast that the Movement's leaders say they have difficulty seeing much beyond the next six months. But one thing is almost inevitable, comments one: Some sort of confrontation with the powers that be.

Tomorrow: How Moscow and the local Communist Party leadership are tackling the Baltics' demands.